Ethics & Public Policy Center

Walker, Rubio Health Plans Renew Reaganism for Our Age

Two leading Republican presidential candidates, Scott Walker and Marco Rubio, recently released concept papers that promise to provide “all Americans” with government-subsidized access to health insurance. This is a monumental development for both the campaign and for the conservative movement, one that breathes Ronald Reagan’s soul into the Republican nomination fight.

This is not easily noticed on first glance. Both concept papers couch their proposals in the language of repealing and replacing Obamacare. This priority, music that soothes the party’s base, is proper: nothing consistent with conservative principles can be done to improve American health care until the present Obamanation is torn out root and branch.

The key challenge, however, has always been what to do once the monster is killed. Answering this challenge requires conservatives to deeply ponder their principles to determine exactly why they opposed Obamacare in the first place. That, it turns out, is not an easy question to answer.

The more libertarian branches of conservatism often emphasize the cost of covering tens of millions of people and the alleged dependence on government Obamacare would create. If cost and dependence are the problems, then the solution cannot be government subsidized universal coverage even if that coverage is provided by a competitive, private insurance market.

The Reagan wing of the conservative movement, however, is worried more about the way that Obamacare places the federal government in charge of virtually every aspect of the health care system than it is about providing financial assistance to people in need. This view places the human needs first and the cost and “dependence” questions second, just as Ronald Reagan did as both Governor and President.

If the problem with Obamacare is its creeping socialism, its nationalization of the health care system covered by an invisibility cloak, then a Reaganesque replacement of Obamacare would look much different than the libertarian one. It would divide the question of coverage from the question of control, providing direct assistance to people unable to afford coverage today while tearing down the walls Obamacare placed to capture the health care system.

Walker’s and Rubio’s concept papers do exactly that. While Rubio’s is extremely light on details, its first principle is that “we should provide an advanceable, refundable tax credit that all Americans can use to purchase health insurance”. Make no mistake – this is government-subsidized coverage extended to the poor and working class Americans whose Obamacare coverage would otherwise come from Medicaid or highly regulated private markets. If your primary objection to Obamacare is its cost and its creation of “dependence,” then you should oppose Rubio’s replacement plan as vehemently as you opposed Obamacare.

Walker’s plan reflects its author, a sitting governor who has had to actually put his ideas into action, and is much more thorough than Rubio’s. But its first replacement principle is identical: “Ensure affordable and accessible health insurance for everyone”. Again, if your primary objection to Obamacare is its cost and its creation of “dependence,” Walker’s plan ought to be squarely in your crosshairs.

Both plans try to deal with the cost issue by making the coverage extension cost-neutral. Rubio’s does so by taking aim at the current federal health insurance subsidy, the exclusion of health care premiums from payroll and income taxes. His proposal would “set the tax preference for employer-sponsored insurance on a glide path to ensure that it will equal the level of the credits at the end of the decade”. Walker’s does so both by limiting who can take his tax credit to people “without employer-sponsored health insurance,” a much smaller group of people than Rubio’s would apply to, and by requiring that Congress fund the credits through some combination of reduction in the employer health insurance exclusion and the rate of growth in Medicaid payments (both plans would block grant Medicaid to the states and cap in some fashion the amount of the federal contribution).

Note, however, that both plans implicitly permit or endorse increased taxes on the well-to-do to finance increased coverage for the less-well-off. The current exclusion is most valuable to people in higher tax brackets, as the excluded income would otherwise be taxed at the highest marginal rate. Rubio’s plan, which explicitly funds tax credits equal in value for everyone by making the value of the exclusion equal to the credit, would have to dramatically increase the amount of federal taxes paid by taxpayers in the top brackets. Of course, his tax plan could offset those increases for families with children, but older, higher income empty nesters would get a double whammy as their tax rates would rise under Rubio’s tax plan and their formerly excluded health insurance premiums would be taxed at that higher rate.

Walker’s plan permits Congress to place the burden for financing coverage exclusion more broadly. Congress could choose to finance it primarily through limiting the rate of growth in the federal Medicaid contribution. Since almost half of Medicaid funding goes to pay for long-term care for the elderly, primarily in nursing homes, this implicitly could shift the burden for paying for coverage to the nursing home industry. But Congress could also choose to finance the coverage extension in a way similar to Rubio’s plan, by limiting the value of the health care premium exclusion for higher-income taxpayers.

More libertarian conservatives will likely howl at this. If Obamacare is nationalization under an invisibility cloak, Rubio’s and Walker’s plans are cloaked redistribution. Can conservatives rightly endorse such a measure?

As a practical matter, Reagan conservatives already have. Rep. Paul Ryan’s premium support plan for Medicare is simply a different way of delivering the redistribution from high income taxpayers to low lifetime earners. Block-granted Medicaid is the same thing: it simply delivers the federal money – which comes from income tax revenue largely paid by the top earning ten percent of taxpayers – that pays for benefits for low-income or medically needy people in a different way. The Rubio-Walker approach, which is conceptually similar to the Heritage Foundation’s, simply extends this principle to all Americans.

This approach is also deeply consistent with Ronald Reagan’s principles. Prior to Medicare’s creation, Reagan endorsed the Kerr-Mills Act as an alternative. This law sent federal money – again, paid for largely by top earning taxpayers – to states to create programs to help medically needy seniors pay for medical care. This endorsement of redistribution was a feature, not a big, of Reagan’s philosophy. As he wrote in this diary, the federal government should “bypass the bureaucracies: and give “assistance to those who need it”.

Reagan initially opposed Medicare not because it would use federal power to tax some to pay for others’ benefits. He opposed it because it would create “socialized medicine,” which he argued would inevitably force health care providers to treat who the government chose, when the government chose, in a manner the government chose, at a price the government chose. Reagan supported Kerr-Mills while opposing liberal proposals for national health insurance because he believed that the real problem – that some people could not afford access to health care they needed – was solved through small programs like Kerr-Mills rather than large national, compulsory programs like Obamacare.

The Walker and Rubio plans do exactly what Reagan recommended. First, they repeal Obamacare, preventing the federal government from dictating the practice of medicine. Second, they bypass federal bureaucracies and give money directly to people who without financial aid cannot afford continued, steady access to quality health care.

Both Walker’s and Rubio’s plans will need a lot of legislative work to become law were either man to become President. The devil is in the details, and a promising concept can be ruined through shoddy implementation. But for today, conservatives should laud both men for producing plans that apply Reagan’s principles to today’s challenges, something most GOP nominees have failed to do for many, many years.

Henry Olsen is a senior fellow at the Ethics and Public Policy Center.